Recession-hit U.S. health spending barely rose in 2010

WASHINGTON (Reuters) - U.S. healthcare spending barely rose in 2010 from record-low recession levels, as high unemployment and the loss of private health insurance forced many Americans to delay or forego medical treatment, government officials said on Monday.

Spending edged up 3.9 percent, bringing the total size of the U.S. healthcare system to $2.6 trillion, or $8,402 per person, according to a report released by the U.S. Centers for Medicare and Medicaid Services, or CMS, and published in the journal Health Affairs. For a graphic, see: http://link.reuters.com/but85s

Growth in 2010 was only a slim 0.1 percentage point higher than the 3.8 percent recorded in 2009, which was the lowest rate recorded in half a century. Per capita health spending in the United States is still the highest worldwide.

"It's absolutely clear what's going on," said William Galston of the Brookings Institution. "People's budgets have been hard-hit, and even if they have 20 percent co-pays from their insurance companies, that 20 percent may still be too much."

The data are likely to play prominently in the political debate over U.S. government spending as President Barack Obama's 2010 healthcare reform law approaches challenges from the Supreme Court and he fights for reelection in November.

The healthcare industry's share of the U.S. economy was unchanged for the first time since 2006 at 17.9 percent as output from other sectors recovered from the downturn that ended in June 2009.

But even as recession-ravaged consumers avoided prescription drugs, hospitals, doctors and clinics in 2010, medical prices remained on an upward trajectory that slowed only marginally during the 2007-2009 recession.

It was not clear how consumers might have fared in 2011 as the recovery gathered pace and unemployment declined. But some analysts said the durability of healthcare prices and pent-up demand for services could suggest a sharp increase in costs down the road.

Federal spending for Medicare and Medicaid, which benefit the elderly and the poor, respectively, is also a key issue in partisan political wrangling in Congress over the mounting federal debt and deficit that is widely expected to gather momentum after the 2012 elections.

WHITE HOUSE CITES PREMIUM JUMP

The White House welcomed the report as evidence healthcare could be tamed but said it demonstrated the need for consumer protections set out in the Affordable Care Act health reform law, including a requirement that insurance companies justify large premium increases.

"In 2010, the net cost of health insurance - which includes the overhead and insurance company profits - increased by 8.4 percent. That's more than twice the increase in the cost of health care," deputy White House Chief of Staff Nancy-Ann DeParle said in an official blog posting.

Analysts also noted that insurance premiums grew faster than benefits for the first time in seven years.

The healthcare reform law, Obama's signature domestic policy achievement, accounted for only 0.1 percent of the rise in spending in 2010. But much of the law is not scheduled to take effect until 2014, when it is expected to extend coverage to more than 30 million uninsured Americans by expanding Medicaid and setting up state-run health insurance exchanges.

The federal government's $743 billion healthcare bill climbed to 29 percent of total spending, while other spending sources from businesses and households to state and local governments saw their shares of spending decline.

"The greater federal burden contributes more to the deficit, and so in early 2013 there will be even more pressure to cut back, specifically on Medicare, and the promises made to the uninsured through the Affordable Care Act," said Joseph Antos of the conservative American Enterprise Institute.

Federal spending in dollar terms rose mainly as a result of the Obama administration's efforts to help cash-strapped state governments by paying a greater share of Medicaid, which saw enrollment rise as 3.7 million people lost their private health insurance. The Medicaid assistance ended last July.

But the rate of spending growth slowed for both Medicaid and Medicare as Medicaid enrollment decelerated from recession levels and fewer senior citizens signed up for Medicare Advantage, which allows the elderly to purchase private insurance through Medicare.

Medicaid, which is jointly funded by federal and state governments, spent $401 billion, an increase of 7.2 percent. Medicare program costs grew 5 percent to $525 billion.

Prescription drugs, which accounted for 10 percent of healthcare spending, saw historically low growth due largely to the use of generic drugs, a drop in new product introductions and an increase in Medicaid prescription drug rebates.